Secretive Giant TSMC’s $100 Billion Plan To Fix The Chip Shortage

Summary

TSMC, the world's leading chipmaker, controls 24% of the market and over 90% of the most advanced chip production. With a $100 billion investment to boost production, TSMC is addressing the global chip shortage impacting industries like automotive and tech. The company is expanding to the U.S. with a $12 billion plant in Arizona, signifying a strategic move to diversify from its Taiwan base and reduce vulnerability to geopolitical tensions. This expansion is crucial as it aims to revive U.S. semiconductor manufacturing, which has seen a significant decline from 37% in 1990 to just 12% today.

Takeaways

• 💻 TSMC (Taiwan Semiconductor Manufacturing Company) produces 24% of the world’s chips and more than 90% of the most advanced chips, crucial for devices like iPhones and supercomputers.
• 🌍 The global reliance on TSMC makes the chip supply chain vulnerable to risks like earthquakes, droughts, and geopolitical tensions between China and Taiwan.
• 🏗️ TSMC is investing $100 billion over three years to expand production, including building a $12 billion advanced chip manufacturing fab in Arizona, which will start production in 2024.
• 🛠️ The U.S. was once the leader in semiconductor manufacturing but has since fallen behind as 75% of chip production now occurs in Asia.
• ⚡ The smallest, most advanced chips, like 5-nanometer chips, are critical for high-end technology, with only TSMC and Samsung able to manufacture them at scale.
• 🚗 The global chip shortage has impacted various industries, from car manufacturers like GM and Toyota to tech giants like Apple, leading to production delays and cuts.
• 🔧 TSMC’s pure-play foundry model focuses solely on manufacturing chips, allowing them to surpass companies like Intel in advanced chip production.
• 🚀 TSMC’s customer base is diverse, including U.S. fighter jets, iPhones, and automotive AI, and they are planning to expand their presence in the U.S. due to high demand and government incentives.
• 🌱 TSMC’s Arizona fab will recycle up to 90% of the water it uses, addressing environmental challenges like water shortages in the desert.
• 🇺🇸 The U.S. government is pushing for domestic semiconductor production with initiatives like the CHIPS Act, aiming to reduce reliance on foreign manufacturing and strengthen supply chain security.

Q & A

What is the significance of TSMC in the global chip industry?

TSMC is a major player in the global chip industry, producing 24% of all the world's chips and over 90% of the most advanced ones. They manufacture the smallest, fastest chips used in devices like iPhones, supercomputers, and automotive AI.

Why is there a global chip shortage, and how is TSMC responding to it?

The global chip shortage began a few months into the pandemic and has affected industries from automotive to gaming consoles. TSMC is investing $100 billion over three years to ramp up production to address the shortage.

What is the role of TSMC in the production of advanced technology products like iPhones and U.S. fighter jets?

TSMC manufactures the chips used in advanced technology products, including iPhones, U.S. fighter jets, and other high-end processors. They are responsible for producing the most advanced chips that power these devices.

Why is TSMC's production concentrated in Taiwan, and what are the potential risks associated with this?

TSMC's production is concentrated in Taiwan due to the company's origins and the presence of a skilled workforce and infrastructure. However, this concentration could make the global chip supply vulnerable to natural disasters like earthquakes and droughts, as well as geopolitical tensions.

What is the significance of TSMC's $12 billion investment in a fabrication plant in Arizona?

TSMC's investment in Arizona signifies a strategic move to bring advanced chipmaking back to the U.S. The plant, set to begin production in 2024, will be the most advanced technology manufactured in the United States, reducing reliance on Asia for high-tech chip production.

How did TSMC's business model of being a pure-play foundry contribute to its success?

TSMC's business model as a pure-play foundry, focusing solely on manufacturing, allowed it to specialize and excel in chip production. This specialization enabled TSMC to surpass competitors like Intel and become a world leader in chip manufacturing.

What is the importance of the five-nanometer chip technology that TSMC is bringing to the U.S.?

The five-nanometer chip technology is significant because it represents the most advanced chip manufacturing process, offering higher performance and efficiency. Bringing this technology to the U.S. helps to reduce dependency on foreign chip production and enhances the domestic semiconductor industry.

How does TSMC plan to overcome the challenge of water scarcity in Arizona for its new fabrication plant?

To address water scarcity, TSMC plans to build an onsite water treatment center at its Arizona fab that will recycle up to 90% of the water used. The treated water will then be reinjected into the aquifer in partnership with the city of Phoenix.

What steps is TSMC taking to ensure a skilled workforce for its U.S. operations?

TSMC is addressing the workforce challenge by bringing over some of its top experts from Taiwan temporarily and sending around 300 new U.S. hires to Taiwan for 12 to 18 months of training to gain experience in state-of-the-art chip manufacturing.

How does the CHIPS Act proposed by the Biden administration aim to support TSMC and other chip companies in the U.S.?

The CHIPS Act proposes $52 billion in subsidies for chip companies like TSMC to manufacture in the U.S. This act aims to create a level playing field, making it less expensive to produce chips domestically and encouraging the growth of the U.S. semiconductor industry.

What are the potential long-term benefits of TSMC's expansion in the U.S. for the global semiconductor industry?

TSMC's expansion in the U.S. could lead to a more diversified and resilient global semiconductor supply chain. It may also stimulate innovation, create jobs, and reduce the U.S.'s reliance on foreign chip production, enhancing national security and economic competitiveness.